NewsDo Leaders Manage the Crisis, or does the Crisis Make a Leader?

August 7, 2016

How leaders in times of crisis think, act and feel


There is an assumption that times of crisis require leadership, I am interested to find out whether the opposite is true to an equal or greater extent.  That is, I propose that real and impactful leaders require crisis in order to effectively lead.

It is proposed throughout this essay to look at the lifecycle of a business or organisation in the context of leadership and examine the psychology of a leader, which I propose is irrational.  If this is true, how does that psychology manifest in leaders during times of crisis? This raises a question about the difference between how men and women view positions of leadership in times of crisis and whether they choose this consciously.

As with any living organism, a business organisation has a lifecycle.  While there are many differing definitions of what exactly the stages of that lifecycle are, it can be broadly summarised as having four key growth stages – the existence or start-up stage; the emerging or survival stage; the mature or rapid growth stage and then, inevitably, the stage of renewal or re-invention for sustained growth.  The fifth and final (non-growth) stage in the lifecycle of an organisation is decline, which initiates the end of the organisation in its current form.

While leadership can be said to exist at all stages of the business lifecycle, the style and impact of that leadership will differ greatly at each stage.  In practice, we can see that one leader, with one dominant style of leadership, is unlikely to successfully lead the same organisation through the different stages and through the different challenges or crises associated with each stage.

Throughout stage one, the business is a state of constant creative expansion and the founders are generally the best suited to lead through early crises of start-up.  However, as the organisation moves into survival stage, the leaders must transition themselves into a more structured role.  This transition becomes an evolutionary process; the leaders themselves evolve alongside the organisation as it evolves.

By stage three, the organisation, if it continues to growth, is likely to require a larger management team, which manifests itself into a formal hierarchy of management.  At this level, individual leaders are supported to the extent of being replaced by middle level and then upper level management, where each manger specialises in a particular area of the business operations.  This management structure essentially usurps the initial founders from their positions of leaders.   As the focus is on processes and routine, the leaders lose their ability to lead in out-of-the norm situations or at times of crisis.

This often leads to a crisis of identity or function for the founder leaders as they must now re-position themselves or be removed.

This explains why, at stage four, the organisation undergoes a management restructuring from the hierarchical structure adopted between stages two and three, towards a matrix structure.  This is done in an attempt to recapture the early creativity of the organisation; however, this is more likely to fail than not as the founder – if still within the organisation in any capacity – will have adapted in leadership style and psychology over the lifecycle of the business.

This heralds stage five, the decline and ultimate death of the organisation.  There are as many explanations for this as there are failed businesses.  An organisation developmental theory developed by Larry E. Greiner identifies this as the point where the authority within an organisation, as individuals, start to become preoccupied with personal objectives, instead of focusing on the objectives of the organisation.  All are manager, none are leaders and this slowly destroys the functionality and feasibility of the entire business.  Success attributed to the death of the business by not affording the management the opportunity to lead.

In their book, The Psychology of Human Leadership: How To Develop Charisma and Authority, Michael Paschen and Erich Dihsmaier (Chapter 4) suggest that “the psychological effect of leadership is based on reducing fear”

The authors go on to say that it is a fact that “only a crisis is a time of leadership… If there is no crisis, this means that the current leadership structures are guiding behaviour in the desired direction and can stay in place.  There is no need to change anything.  Where do people need to be led in such a situation?…Only emergencies need leadership; happiness doesn’t.  In times of fortune you’ll have trouble positioning yourself as a leader because you don’t solve any problems for the followers and you have no message about where you want to lead.  To lead, you need a crisis…”

The thinking follows that once a crisis is present or an immediate threat, leaders must find an explanation for the crisis and propose their theory for how to overcome it.  In announcing the theory of how to overcome this crisis, leaders introduce some measure of certainty – not certainty in the solution but certainty in the existence of a solution – which has the effect of reducing fear in followers.  As Paschen and Dihsmaier hypothesise “the psychological effect of leadership is based on reducing fear”.

In times of crisis, information is usually imperfect, incomplete and unverifiable.  Yet leadership requires conviction of resolution or survival.  Taking the recent economic meltdown into consideration, and based on what has been reported about the mishandling of information that was communicated to the public and key stakeholders by financial institutions, it is apparent that crisis leadership requires creativity.  Creativity and dishonesty are very closely linked.  But in times of crisis, this behaviour becomes easier to rationalise.  This is a view shared by Dan Ariely, Professor at Duke University, Founder of the Centre for Advanced Hindsight.

He is interested in the study of “human behaviour, rationality and irrationality; the cases where we make good decisions and where we make bad decisions”.  His work at the Centre, together with colleagues and students, looks at hundreds of cases.  In recent years, his focus has been on dishonesty. In his recent documentary (Dis)Honesty:  The Truth About Lies, (2016) he spoke about his fascination with irrationality.  He cited the example of nursing staff in a hospital, treating him for burn wounds, and how they would pull the bandages off his burn wounds quickly and painfully.  They continued to do this, despite his – the patient’s – protestations.  He could not understand or accept their thinking; it was irrational to him that they would opt to shortening his time in pain, rather than lessening the intensity of his pain, in what was a daily ritual.

Professor Ariely’s work spans the fields of behavioural psychology and behavioural economics.  In essence, he challenges the assumptions that people are perfect decision-makers; that we can compare all viable options with no limitations of cognitive capacity.  His research methodology is to observe people in a variety of situations and what they find is that, often, people do not think long term, they can be vindictive and are many times unable to consider all the options.  They do not always behave in a rational way, as he had suspected from his earlier experiences in hospital.

This irrationality breeds beliefs that are simply untrue but can be explained by the natural tendency towards self-bias.  For example, he points out that the vast majority of people believe that they are better drivers than they actually are.  The same applies to the psychology of business leaders who over-estimate their abilities; as a result, they drive their business or organisation too fast in conditions that, if not apparently dangerous, are at least high-risk.  But the tendency is to ignore the risks for our own behaviour, as if do not apply.

”Self-deception starts off by know that we are lying to ourselves; we are aware that we are engaging in rationalisation… And after a while we believe what it is we are telling ourselves”, explains Tali Sharot, Cognitive Neuroscientist.  This is the core essence of the Optimism Bias.  This is both positive and negative; however, Sharot concludes that the positive must outweigh the negative in order for us to evolve.

Crises demand a clear set of leadership skills, the most important of these is the ability and willingness to analyse, interpret and communicate a situation in turmoil.  This must be done in an authoritative way with demonstrate empathy. In her article ‘Crisis Control: Leadership Skills for the 3 Phases of a Crisis’ by Caroline Sapriel she writes that  “Being able to analyze a situation and its risks with limited information, map internal and external stakeholders, anticipate escalation, show empathy, communicate, and protect credibility instead of only the bottom line are some of the key elements of crisis leadership that can save the day.”

Rudolph Giuliani, who was Mayor of New York at the time of the terrorist attack on the World Trade Centre,  maintains that people will follow the leadership of an individual who “sets a direction and communicates that direction.”   His strategy in the immediate aftermath of the attack was to respond quickly, communicate as openly as was possible given the circumstances and o engage with the public, as much as possible, with a message of empathy and conveying a strong level of conviction that the city would survive the attack.  It follows that leaders must be credible then in order to be effective.

In his study ‘The role of psychological factors in the management of crisis situations’, Dr. Gary Buck C.Psychol. AFBPsS (University of Westminster, November 2003) explores a number of psychological factors that affect the management during times of crisis.

“Firstly, the complexity of an individual’s information processing has been linked to successful management of critical situations. To be able to process information in a complex manner an individual must have the underlying capacity to operate at such high levels. This capacity (referred to as conceptual complexity) can be characterised by personality traits such open-mindedness and flexible, or perhaps better viewed as the non-authoritarian and non-obsessive personalities…  The level of stress perceived by the individual will then lead them to adopt a pattern of coping behaviours, (unconflicted adherence, unconflicted change, defensive avoidance, hypervigilance and vigilance), in order to deal with the psychological conflict caused by the situation and the stress engendered by it.”

The purpose of this study was to investigate the role of individual psychological factors in the management of critical situations. The premise is that leaders in times of crisis do not operate within a vacuum and factors such as the lack of verifiable information, time pressures or even the prevailing corporate culture will likely influence behaviour and decision-making.

Managers who lack leadership skills are more likely to possess lower levels of conceptual complexity and are motivated by their need for affiliation or power, whereas successful leaders tend to be open-minded and flexible, and they are motivated by a need to achieve.

Effective, intuitive decision-making is another key characteristic of leaders over managers.  They take ownership for the solution and any mistakes they make because they understand that an imperfect decision can often be better than not making any decision at crucial times.  A new study published in Psychological Science, a journal of the Association for Psychological Science, explored how, following the recent economic crisis, women appear to be over-represented in “precarious leadership positions at organizations going through crisis.”  This is despite the prevailing reality of women being underrepresented across top level business management in general.   The article –  entitled Influence in Times of Crisis: How Do Men and Women Evaluate Precarious Leadership Positions? – suggests that it is not the high-risk positions that attract women leaders, but rather their feminine leadership traits such as empathy and tact, make them better leaders in times of crisis.  In the study, psychological scientists Floor Rink and Janka Stoker (University of Groningen) and Michelle Ryan (University of Groningen and the University of Exeter) hypothesised that, following gender norms, women would be more attentive to communal aspects of such leadership roles, focusing on social resources, while men would have a tendency towards the aspects related to authority and hierarchy, thereby focusing on financial resources.  The study was based around a hypothetical company in financial difficulty.  Subjects were given leadership roles and each group were given a different set of resources.  One group was given employee support i.e. social resources and financial investment from management i.e. financial resources; a second group were given financial investment and no employee support; the third group were given employee support but no financial investment.  The results showed that, comparing across genders; women were less likely to accept the position that lacked social resources, while men were less inclined to accept the position that lacked financial resources.  The researchers found that women viewed employee acceptance as a factor that would lead to influence in times of crisis, while men viewed influence as an attribute that would lead to employee acceptance in times of crisis.

It is perhaps not a coincidence that founders or serial entrepreneurs share many of the psychological traits as impactful crisis leaders, most notably, an ability to see the reality of the situation and to make a judgment based on incomplete information.  This might be identified as intellectual integrity.  They possess the ability, and more importantly, the willingness to see the big picture and can quickly diagnose cause and effect and the distinction between the two, which is difficult in times of crisis.

The difference between knowledge and experience

Carol Tallon